Microbial decomposers colonising submerged leaf litter are in close spatial proximity with periphytic algae and can use carbon (C) exudates released during photosynthesis. We investigated whether labile C delivered as algal exudates could affect the microbial colonisation and decomposition of leaf litter. Using microcosms, we submerged leaf litter in pond water and monitored fungal and bacterial growth over time and tested the effect of algal photosynthetic exudates by comparing microcosms in light and dark. In order to experimentally assign the effect of algal products to labile C delivery and test for a C driven mechanism, we ran a parallel experiment with microcosms in the dark where we mimicked the delivery of algal labile C by continuously adding glucose. Labile C delivered as algal exudates or glucose resulted in a dominance of fungal decomposers over bacteria, and stimulated the acquisition of more N-rich OM fractions from litter during periods of active fungal growth. Our results highlight that labile C stimulates fungal decomposers and increases N removal from leaf litter. Since fungal necromass is more resistant to degradation than bacterial, we expect that a fungal-dominated litter degradation might contribute to more protected C pools.